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Russian Economy, Finance Ministries at Odds Over Hydrocarbons Tax

The Russian ministers of economy and energy have stated their opposition to an increase in taxes on hydrocarbons. The statements came Wednesday after Russian Finance Minister Anton Siluanov presented a plan to raise taxes on all oil and gas development with the intention of using the funds to bolster the struggling Russian economy. An increase, Siluanov argued, would create $600 billion in new revenue as Russian oil and gas production is currently near post-Soviet highs.

Russian Deputy Minister of Economy Nikolay Podguzov countered this argument saying that the increase would stymie production and discourage new investment within Russia. Podguzov also denied that a tax increase would lead to $600 million in new revenue, characterizing it is as a “significant overestimation.” Russian President Vladimir Putin has thus far refused to take a position on the issue, preferring instead to encourage discourse and discussion related to the possible increase.

The Russian economy has continued to struggle amid low oil prices and Western sanctions. A new figure released by Rosstat indicates that unemployment in August 2015 is up 13.5 percent when compared to similar statistics from 2014.

Belarusian opposition politician and recently released political prisoner Mikalay Statkevich addressed a crowd of several hundred supporters in Minsk, encouraging them to boycott he October 11 presidential elections. While the outcome of the elections in Belarus is all but decided in favor of the incumbent President Lukashenka, a Radio Free Europe report suggests that the protest, which was held and concluded peacefully, represents a success for the Belarusian opposition. The fact that security services allowed the rally to take place suggests that the Belarusian presidency is easing its stance toward opposition figures.

Iranian daily oil production is expected to increase by 4.2 million barrels by the end of 2015, according to the Iranian oil minister. The increase is not surprising given the expected investment boom in Iran following the removal of sanctions, although it remains to be seen how Iranian production will be made possible in the short-medium term given the lack of available technology. Once western firms enter the country as expected shortly after the removal of sanctions, development and implementation of updated extraction technology could still take between 12 and 18 months.

A spokesman for Russian President Vladimir Putin indicated that cooperation with Turkey on the so-called “Turkish Stream” pipeline network is under way and that, in spite of minor “complications” progress on the project has been made. The Kremlin has been adamant that the fact that some Turkish politicians had expressed doubt concerning the project’s viability that the relationship with Turkey is generally positive and that the project in question will proceed as planned.

The Latvian Ministry of Economy released figures showing that the Latvian economy has lost approximately 70 million euros as a result of economic sanctions on Russia. Milk production, transport and fish processing were the areas most impacted by the sanctions, albeit for different reasons. The Russian food embargo has deprived Latvian milk production companies from one of its most important markets, and a weak ruble has discouraged travel and fish processing plants have lost business in line with the decline in the Russian economy.